• Announcement
15. September 2022

While smallholder palm oil farmers often live in poverty, the $282 billion palm oil industry generates huge annual profits. Policies focus on these large industrial plantations - even though smallholders in the palm oil sector currently account for around 30% of global production and play a huge role in the sustainability of the sector.

An articel by Solidaridad

Due to the high profitability of palm oil cultivation, the share of smallholders is expected to increase further. This means that smallholders are playing an increasingly central role in rural economic development and biodiversity conservation. Palm oil is an important component of the diets of the world's poorest people, and is also widely used in products such as margarine, shampoo and biodiesel-the inclusion of smallholders in the supply chain is crucial for more sustainable palm oil production.

The first Global Palm Oil Barometer by Solidaridad and smallholder producer organisations from Asia, Africa and Latin America sheds new light on the largely negative public debate on palm oil in Western countries. The barometer shows that smallholders have a significant role to play in making palm oil production more sustainable and makes it clear that the controversial crop has more opportunities and issues than most people realise.


Palm oil production is repeatedly cited in the media as a cause of deforestation, biodiversity loss and climate change. This view isolates the environmental impact from the poverty crisis to which it is directly linked-which leads to the role of smallholders in palm oil production being overlooked. In addition to the large companies that grow oil palm in huge monocultures, more than three million smallholders and their families produce about 30 per cent of the world's palm oil. And a large number of workers find employment in palm oil production. In Indonesia alone, around 16 million people work in the palm oil sector, the majority of them in smallholder production. It is expected that the share of smallholders in the total production of palm oil will increase if the industrial companies limit their expansion in the future due to the obligation to avoid deforestation.

"Smallholders do not even produce 2% of the certified sustainable palm oil on the market, even though they account for 30% of the global market. Governments and companies must include smallholders in their sustainability criteria."

- Shatadru Chattopadhayay, Executive Director of Solidaridad Asia


In 2020, $17 billion of the palm oil industry's $282 billion in total annual revenue was generated by smallholders - but many of them do not earn enough to cover their families' living costs. Despite this, many smallholders prefer oil palm to other crops such as rubber or coffee because they can harvest oil palm all year round and earn a higher and more consistent income. For many smallholders, oil palm cultivation offers better prospects and alleviates their poverty.

"With all these price fluctuations, it is becoming more and more difficult for the farmers. Some feel that they have lost 50 per cent of their livelihood because the price of fresh fruit bunches has dropped and at the same time the price of fertilisers and pesticides has increased by more than 100 per cent."

- Valens Andi, Head of a farmers' cooperative in West Kalimantan, Indonesia, told Al-Jazeera

Several factors influence the profitability of a farm, such as size, labour costs, market access, prices and fertiliser costs. Fluctuating market prices squeeze smallholders' already low profit margins. Faced with these precarious conditions, many smallholders are unable to invest in farm-level innovations or adhere to sustainability standards. By 2030, smallholders will account for around 60 per cent of Indonesia's oil palm acreage. Supporting them to switch to more sustainable production methods will be a key challenge in the coming years.


While smallholder farmers struggle to make ends meet, at the other end of the supply chain, food manufacturers, home and personal care companies and retailers pocket 66 per cent of the gross profits from palm oil production. In order to maximise their profits even more, companies are focusing on further reducing their costs, in stark contrast to their own sustainability commitments and the global climate and UN Sustainable Development Goals. Worryingly, global palm oil buyers show little willingness to compensate small producers for their sustainable actions, for example by paying a fair price and investing in long-term trading relationships. A more equitable distribution of value and risk in the palm oil value chain would enable farmers to produce more sustainably on the one hand, and on the other hand to earn an income that secures the livelihood of their families.


The interests of smallholders are not only overlooked along the value chain, but also ignored in the public debate. Non-governmental organisations and trade brands call for a boycott of palm oil in order to combat the loss of biodiversity. Yet many scientists and conservation organisations agree that banning palm oil would only shift the problem and threaten other habitats and species! Oilseeds are far more productive than any other oil plant, for example, on average five times more productive than soy. Replacing palm oil with alternatives would intensify the struggle for scarce arable land. Instead of boycotting palm oil, the industry should invest in sustainable palm oil production by smallholder farmers.


Farmers' organisations should play a key role in the debate on the future of oil palm cultivation. Fair distribution along the value chain and minimisation of environmental degradation must come into focus. It is time for the private sector and governments to move away from technical, small-scale assistance to programmes that address the structural disadvantages of smallholder farmers. These programmes and solutions will not be the same everywhere and must be found in a combination of voluntary and mandatory approaches.

"Companies and governments in consumer and producer regions must take the interests of smallholders into account when developing and implementing policies. The EU should ensure that smallholders are supported to meet the requirements of the EU Deforestation-Free Products Regulation and to address the root causes of deforestation, including poverty, in partnership with producer countries."

Heske Verburg, Executive Director of Solidaridad Europe